Question

Metropolitan Masonry had sales on account of $7,700 which were subject to state sales tax of 10%. The entry to record the sales would be to:

A. debit Accounts Receivable, $7,700; credit Sales revenue, $7,700.

B. debit Accounts Receivable, $7,700; debit Sales tax payable, $770; credit Sales revenue, $8,470.

C. debit Accounts Receivable, $8,470; credit Sale revenue, $8,470.

D. debit Accounts Receivable, $8,470; credit Sales revenue, $7,700; credit Sales tax payable, $770.

Answer 1

The correct entry for recording sales on account with a 10% sales tax is to debit Accounts Receivable for the total amount, including sales tax, and credit Sales Revenue for the sales before tax, and Sales Tax Payable for the amount of the sales tax.

Step-by-step explanation:

The question asks about the appropriate journal entry to record sales on account that are subject to sales tax. The correct entry is to debit Accounts Receivable for the total amount received from the customer, including sales tax, and to credit Sales Revenue for the sales amount before tax, and credit Sales Tax Payable for the amount of the sales tax. Using the given information, when Metropolitan Masonry had sales on account of $7,700 with a state sales tax of 10%, the journal entry to record the sales would be: debit Accounts Receivable for $8,470 (which is $7,700 plus the 10% sales tax of $770), credit Sales Revenue for $7,700, and credit Sales Tax Payable for $770.